BEDFORD, Mass., May 07, 2020 (GLOBE NEWSWIRE) — Anika Therapeutics, Inc. (NASDAQ: ANIK), a global, integrated joint preservation and regenerative therapies company, today reported financial results for the first quarter ended March 31, 2020, and provided an update on its business progress in the period.
“Anika delivered solid first quarter results and made significant progress towards advancing our strategic plan, including completing the transformative acquisitions of Parcus Medical and Arthrosurface and strengthening our executive leadership team,” said Cheryl R. Blanchard, Ph.D., President and Chief Executive Officer of Anika Therapeutics. “In March, our top priority quickly shifted to protecting the health and safety of our employees and the patients we serve. We have taken multiple proactive steps to ensure their wellbeing, including following the guidelines from the CDC. We have also taken actions to control our costs and strengthen our liquidity to ensure we are well positioned to continue our growth once elective procedures gradually return to a more normal volume. The long-term fundamentals of our business remain strong and our financial strength positions us to continue delivering on our strategic initiatives as we actively navigate this temporary period of uncertainty.”
First Quarter Financial Results
Due to circumstances and disruptions related to the COVID-19 pandemic, Anika has estimated the amounts on goodwill impairment and reduction to the fair value of contingent consideration related to the recent acquisitions of Parcus Medical and Arthrosurface reported in this earnings release. These amounts should be considered provisional subject to the completion of the related accounting work. Anika does not expect changes with respect to other reported results, except as a result of changes that may be made to the provisional amounts. Anika will utilize the extended filing deadline under the recent COVID-19 relief order issued by the Securities and Exchange Commission to delay the filing of its Quarterly Report on Form 10-Q for the first quarter of 2020. For additional information, please see the section captioned “Clarifying Note about Financial Results” below.
- Total revenue for the first quarter of 2020 increased 43% year-over-year to $35.4 million, compared to $24.7 million for the first quarter of 2019. The increase in total revenue was due primarily to higher Joint Pain Management revenue, which delivered global growth of 12% year-over-year for the quarter, and new Orthopedic Joint Preservation and Restoration revenue which resulted from the acquisitions of Parcus Medical and Arthrosurface in the first quarter of 2020.
- Cost of product revenue, research and development expenses and selling, general and administrative expenses for the first quarter of 2020 were $34.7 million, compared to $19.2 million for the first quarter of 2019. The increase was due primarily to an increase in selling and marketing expenses related to the Company’s newly acquired sales infrastructure and acquisition related expenses, including non-cash charges, totaling $7.3 million in the quarter.
- Included in total operating expenses for the first quarter of 2020 were $24.3 million of reduction in fair value related to acquisition contingent consideration liabilities, recorded as a non-cash gain, and a $20.0 million non-cash goodwill impairment charge as a result of the estimated impact of the COVID-19 pandemic on the recently acquired companies. These amounts are provisional, are believed to be reasonable estimates based on the information available and judgments made to date and are subject to potential changes.
- Based on the provisional amounts discussed above, net income for the first quarter of 2020 was $3.5 million, or $0.24 per diluted share, compared to net income of $4.5 million, or $0.31 per diluted share, for the first quarter of 2019. Adjusted net income (see description below) for the first quarter of 2020 was $6.5 million, or $0.45 per diluted share.
- Adjusted EBITDA (see description below) for the first quarter of 2020 was $9.5 million, compared to $8.3 million for the first quarter of 2019. The year-over-year increase was due primarily to total revenue growth, partially offset by increases in cost of product revenue and selling and marketing expenses.
- Cash, cash equivalents and investments were $92.3 million as of March 31, 2020, compared to $184.9 million as of December 31, 2019. The decrease in cash, cash equivalents and investments was due to $93.0 million of upfront payments for the acquisitions of Parcus Medical and Arthrosurface.
Recent Business Highlights
- Anika named Cheryl R. Blanchard, Ph.D., as President and Chief Executive Officer on April 26, 2020. Dr. Blanchard had served as interim Chief Executive Officer of Anika since February 2020 and as a non-executive member of the Company’s Board of Directors since August 2018. Dr. Blanchard has more than 25 years of executive management experience with deep expertise in orthopedic medical devices, regenerative medicine and drug delivery.
- The Company completed the acquisitions of Parcus Medical and Arthrosurface, on January 24 and February 3, 2020, respectively, and has executed well against its aggressive integration plans. As a result, anticipated benefits to commercial operations, infrastructure development and expansion of product pipeline were already realized in the first quarter.
- The Company further strengthened its leadership team with the appointment of David Colleran to the newly created position of Executive Vice President, General Counsel and Corporate Secretary. In this new role, Mr. Colleran will lead the Company’s global legal organization, including corporate governance and compliance.
Response to COVID-19 Pandemic
As previously disclosed, Anika has taken a number of steps to safeguard the health of its employees worldwide, strengthen the financial position of the Company, support the needs of partners, and ensure patients have the treatments they need. As part of that effort, Anika has been closely monitoring its manufacturing and supply chain resources and taking measures to ensure product availability globally. At this time, the Company does not anticipate disruption to its supply of products for patients due to the COVID-19 pandemic.
As previously disclosed on April 8, 2020, the Company drew down $50.0 million on its existing credit facility to strengthen liquidity. The credit facility matures in October 2022, and Anika may prepay the credit facility without penalty. The applicable initial interest rate under the credit facility is 2.08% for the $50.0 million drawdown. The Company’s credit facility also has a $50.0 million accordion feature that the Company could potentially access in the future. Anika has also implemented a number of internal short-term expense controls and is prioritizing business initiatives to conserve cash flow.
Additionally, Anika has been working with clinical trial sites and other partners to safely continue its ongoing clinical studies, while at the same time determining the impact of COVID-19 on the clinical studies. The goals are to maintain patient safety and to minimize disruption to the ongoing clinical studies. As a result of the COVID-19 pandemic, the Company no longer expects to commence the CINGAL pilot study in the first half of 2020, complete patient enrollment in the HYALOFAST Phase III trial by the end of 2020, or submit a 510(k) application to the U.S. Food and Drug Administration for its Rotator Cuff repair therapy in early 2021, as previously projected. Given the evolving environment, the Company will update product development and clinical trial timelines after it has more visibility on the length and regional impacts of the COVID-19 pandemic.
Full Year 2020 Corporate Outlook
Due to the evolving and uncertain impact of the COVID-19 pandemic, Anika is withdrawing its previously announced financial guidance for the full year of 2020, which was issued on February 20, 2020.
Clarifying Note about Financial Results
Due to circumstances and disruptions related to the COVID-19 pandemic, amounts reported in this earnings release related to goodwill impairment and reduction to the fair value of contingent consideration should be considered provisional and subject to the finalization of the analyses required to complete the accounting for these non-cash items. Specifically, the Company, with its external advisors, is determining the impact of the evolving COVID-19 situation on these amounts as they relate to the recent acquisitions of Parcus Medical and Arthrosurface. The amounts associated with these U.S. GAAP measures as presented in this earnings release are believed to be reasonable estimates based on the information available to, and assumptions and judgments made by, Anika to-date. Final results could differ from those presented here. With respect to financial results presented in this earnings release that are not affected by the calculations of goodwill impairment or reduction to the fair value of contingent consideration, the Company does not expect any material changes except to the extent that such results are impacted by events between the date of this earnings release and the date on which it submits its Quarterly Report on Form 10-Q for the first quarter of 2020 to the U.S. Securities and Exchange Commission, or SEC. The Company intends to rely on the relief provided by the SEC under Release No. 34-88465 as it relates to its continued work to determine final goodwill impairment and reduction to fair value of contingent consideration amounts and presently intends to file its Form 10-Q with the SEC on or before May 22, 2020, but, in any event, no later than June 25, 2020, which is 45 days from the Form 10-Q’s original filing deadline of May 11, 2020.